Tuesday, December 07, 2010

Webliography: Public-employee compensation

Freezing Out Hope (Paul Krugman, New York Times, 12/2/2010) "America’s long-run deficit problem has nothing at all to do with overpaid federal workers. For one thing, those workers aren’t overpaid. Federal salaries are, on average, somewhat less than those of private-sector workers with equivalent qualifications. And, anyway, employee pay is only a small fraction of federal expenses; even cutting the payroll in half would reduce total spending less than 3 percent."

Correcting Myths About Federal Pay Center for American Progress 10/25/2010) "Federal workers earn 22 percent less than their counterparts in the private sector...The public’s misperception of federal employees as overfed bureaucrats underscores the recent success of conservative commentators at perpetuating false stereotypes about public servants.... These myths fuel antigovernment resentment and buttress right-wing talking points on this topic ...The federal workforce today as a proportion of the total U.S. workforce is about half what it was in 1970. This downsizing has come as the government’s responsibilities have increased in size and complexity.As the federal workforce becomes better educated and more skilled than the private sector, it’s natural that average wages would go up. Moreover, these higher-skilled federal workers are underpaid relative to their private sector peers."

How much can we blame on state pensions? -- (Ezra Klein, Washington Post 10/12/2010) -- If you compare workers of like education, experience, etc., you'll find that blue-collar workers in the public sector do a bit better than blue-collar workers in the private sector, but white-collar workers do a lot worse...... More than half of all public employees have college degrees, compared to about 35 percent of private-sector employees. "

Debunking the Myth of the Overcompensated Public Employee (.pdf)(Economic Policy Institute, 9/15/2010) -- "The study analyzes workers with similar human capital. It controls for education, experience, hours of work, organizational size, gender, race, ethnicity and disability and finds that, compared to workers in the private sector, state government employees are undercompensated by 7.55% and local government employees are undercompensated by 1.84%."

Employer costs for employee compensation, June, 2010 -- The U.S. Bureau of Labor Statistics -- " Private industry employers spent an average of $27.64 per hour worked for employee compensation in June 2010, the U.S. Bureau of Labor Statistics reported today. Wages and salaries averaged $19.53 per hour worked and accounted for 70.6 percent of these costs, while benefits averaged $8.11 and accounted for the remaining 29.4 percent. Total compensation costs for state and local government workers averaged $39.74 per hour worked in June 2010. Total compensation costs for civilian workers, which include private industry and state and local government workers, averaged $29.52 per hour worked in June 2010." (See also the BLS National Compensation Survey, 6/2010)

Federal pay ahead of private industry (USAToday, 3/8/2010) -- "Accountants, nurses, chemists, surveyors, cooks, clerks and janitors are among the wide range of jobs that get paid more on average in the federal government than in the private sector. Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available."

How state workers' pay really stacks up --- (Seattle Times, 3/6/2010) -- "Some government critics contend state workers are earning more than their private-sector counterparts. An analysis of wage data by The Seattle Times shows that claim in many cases is incorrect or oversimplified."

Two Americas: Public Sector Gains in Recession --(The Manhattan Institute, February, 2010) "During the recession, public employees have continued to see strong wage growth, well ahead of the private sector. From the first quarter of 2007 through the last quarter of 2009, the average value of hourly compensation (wages plus benefits) rose by 9.8 percent for employees of state and local governments, compared to 6.9 percent in the private sector. (Federal civilian employees, about 10 percent of the public sector workforce, are excluded from these data, but they saw wage increases averaging 9.9 percent over the same period) After adjusting for inflation, public employees have seen a rise in real hourly income over this period, while private employees have not....Over this period, public-employee compensation has risen nearly 50 percent faster than private-employee compensation. Governments are aggressively increasing public-employee compensation even though labor markets are loose and states face record budget deficits."

Public Sector Unions and the Rising Costs of Employee Compensation .pdf (Cato Institute Journal, Winter 2010) --"Between 1950 and about 1980, average compensation in the public and private sectors moved in lockstep. But after 1980, public sector compensation growth began to outpace private sector compensation growth, and by the mid-1990s public sector workers had a substantial pay advantage. In the boom years of the late-1990s, private sector workers closed the gap a bit, but public sector pay moved ahead again in the 2000s.... In 2008, 38.5 percent of all state and local workers were members of unions, which is five times the union share in the U.S. private sector of 7.6 percent....Unionized public sector workers have far higher wages and benefits, on average, than nonunionized public sector workers. Their wages are 31 percent higher, on average, and their benefits are 68 percent higher. Overall, the union compensation advantage in the public sector is 42 percent."

For feds, more get 6-figure salaries --(USA Today, 12/11/09) " The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data. Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted. Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.....Jessica Klement, government affairs director for the Federal Managers Association, says the federal workforce is highly paid because the government employs skilled people such as scientists, physicians and lawyers. She says federal employees make 26% less than private workers for comparable jobs."

Are Federal Workers Overpaid? (by Nancy Folbre, professor of economics, University of Massachusetts, Amherst, in the New York Times, 10/13/2009) --"Some oinking can definitely be heard out there in the labor market, but anyone willing to follow the numbers can tell that the biggest piggies are not those employed by the federal government."

Pay Differences between State Government and Private Sector Employees, by State, Race, and Gender. (pdf) A 2009 report from the Department of Public Management and Policy, Andrew Young School of Policy Studies Georgia State University: "We find little evidence that (state and local government) employees are overpaid. Holding constant education, estimated work experience, occupation, location, race, and gender, SLG employees earned 4 to 6% less than comparable private sector workers...White males receive little, if any, public pay premium, but minorities and women are paid more than their private-sector counterparts. However, it is unclear whether this differential is the result of public-sector overcompensation or private-sector discrimination. "

Benefit Cost Comparisons Between State and Local Governments and Private-Sector Employers (.pdf) (Employee Benefit Research Institute, June, 2008) "Major reasons for the differences in total compensation costs between state and local government employers and private sector employers are the different composition of their respective work forces and the different nature of public- vs. private-sector work. State and local government jobs include education and public safety functions (teachers, police, and firefighters), which involve high levels of education, training, physical fitness, or risk) and largely do not exist in the private sector. Unionization rates also are higher in the public sector than in the private sector.

Labor unions play a diminishing role in the private sector, but they still claim a large share of the public-sector workforce. Public-sector unions are important to examine because they have a major influence on government policies through their vigorous lobbying efforts. They are
particularly influential in states that allow monopoly unionization through collective bargaining.
Collective bargaining is a misguided labor policy
because it violates civil liberties and gives unions excessive power to block needed reforms. To provide policymakers with greater flexibility and to improve government efficiency, states should follow the lead of Virginia and ban collective bargaining in the public sector.

State and local governments face large budget deficits
as revenues have stagnated and spending has remained at
high levels. To reduce deficits, large savings can be found
in the generous compensation packages of the nation’s 20
million state and local workers. In 2008, wages and
benefits of $1.1 trillion accounted for half of total state and
local government spending.1 This bulletin examines state
and local compensation costs, with a focus on the lucrative
pensions enjoyed by public sector workers.
Public Sector vs. Private Sector Compensation

State and local governments have amassed large debts
and unfunded obligations. Debt in the form of bonds has
soared to $1.9 trillion. State and local pension plans are
underfunded by about $700 billion. Underfunded retiree
health plans for government workers represent another
large fiscal hole. On the basis of our review of data for 27
jurisdictions, we estimate that state and local retiree health
benefits are underfunded by $1.4 trillion nationwide. All
those liabilities represent a looming threat to taxpayers and
indicate the need for major reforms of government benefit
plans and other spending activities.

Nick Gillespie pointed earlier to the latest evidence that federal workers have long since lapped their private sector benefactors in salary and job growth, in addition to their traditional advantages in job security and benefits. (Fun fact! Back in February 2008, before Bear Stearns, Lehman Brothers, and George W. Bush's disaster socialism, The New York Times reported that Dubya was "in line to be the first president since World War II to preside over an economy in which federal government employment rose more rapidly than employment in the private sector.")

1. They cost too much. As USA Today recently noted, federal employees make on average almost $8,000 more than their private-sector counterparts.
2. We can't fire them. The private sector has shed positions in response to slackening demand and the economic downturn. That sort of adjustment is painful but necessary, as it allows the economy to adjust to changing circumstances and workers and employers to move into new activities. Because it is guaranteed certain amounts of tax revenue and has a non-market mind-set, the public sector is largely insulated from such forces and keeps or even adds workers despite changed conditions.
3. They create a permanent lobby for expanded government and higher taxes.

There was a time when government work offered lower salaries than comparable jobs in the private sector but more security and somewhat better benefits. These days, government workers fare better than private-sector workers in almost every area—pay, benefits, time off, and job security. And not just in California.

According to a 2007 analysis of data from the U.S. Bureau of Labor Statistics by the Asbury Park Press, “the average federal worker made $59,864 in 2005, compared with the average salary of $40,505 in the private sector.” Across comparable jobs, the federal government paid higher salaries than the private sector three times out of four, the paper found. As Heritage Foundation legal analyst James Sherk explained to the Press, “The government doesn’t have to worry about going bankrupt, and there isn’t much competition.”

As opposed to Paul Krugman, that voice of moderation and reasonableness.

ZORN REPLY -- Krugman is one link out of many. And he does have a Nobel. You're giving me libertarian think-tanks cribbing off BLSdata that the BLS warns should NOT be used to draw these half-vast conclusions.

Some of these studies funded by interest groups that find public employees are paid less strain rather hard to determine a level at which a given person "should" be paid. Thus, a letter carrier with a college degree is "underpaid." That certainly is the case with the "Out of Balance?" one, commissioned by a bunch of government HR types who live in a fantasy world in which government jobs are hard to fill (busboy-hiring "race for talent Todd Stroger would agree).

Histroically (at least since WWII), public sector employees WERE less generously compensated than their private sector counterparts. This less-generous payday compensation was counterbalanced by union membership and benefits enjoyed under colletive bargaining agreements, as well as very generous early retirement benfits. (The collectively bargained contracts mirrored those enjoyed by the strongest unions in the heyday of union membership (1950s-1960s).

However, since the "hollowing out" of the middle class which began (for most practical purposes) with the election of Reagan in 1980), middle-class Americans' earning power has suffered mightily when compared to the highest income levels. Conversions of defined benefit plans (pensions) to 401ks, increased to health insurance premiums/contributions, the increase in the regressiveness ("flattening") of the income tax rates, have all negatigely impacted those in the private sector. The private sector has suffered much more so than gov't employees, because the latter (1) have enjoyed the benefits of "old school" union contracts (despite the economic erosions suffered by unions in the private sector), (2) have (in Illinois at least) an inordinate amount of political power prtecting their very generous (in today's terms) total compensation packages, and (3) constitutional protection (in Illinois at least, again) for the pension benefits they've earned already. (Although I've been following with interest - and hope - that the assertions that the Illinois consitution DOESN'T provide the "guarantee" of existing pension benefits that the puiblic sector unions claim.)

Public sector unions TODAY have it better thantheir private secotr counterparts. But all in the lower 4/5ths of the socioeconomic strata have it worse than 30 years ago. Regardless as to what the Right likes to say, tax cuts DO NOT "pay for themselves". This shibboleth has been taken as gospel by the Right since Reagan - despite all of the economic evidence to the contrary since then.

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"Change of Subject" by Chicago Tribune op-ed columnist Eric Zorn contains observations, reports, tips, referrals and tirades, though not necessarily in that order. Links will tend to expire, so seize the day. For an archive of Zorn's latest Tribune columns click here. An explanation of the title of this blog is here. If you have other questions, suggestions or comments, send e-mail to ericzorn at gmail.com.
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